Article Review: Understanding the FIFO Method in Accounting

The article provides a comprehensive overview of the FIFO (First In, First Out) method in
accounting, focusing on its key aspects, functioning, comparison with LIFO, advantages, and
disadvantages.

Relevance to the Material:

 Importance of Inventory Control: FIFO is highlighted as a fundamental asset

management and valuation approach, emphasizing its role in preventing obsolescence
and ensuring the efficient flow of inventory items, which aligns with the importance of
inventory control in supply chain management

 Cost Flow Assumptions: The article explains how FIFO operates based on the
assumption that assets with the oldest costs are utilized first, which relates to the
inventory cost flow assumptions covered in the coursework

 Comparison with LIFO: The comparison between FIFO and LIFO underscores their
contrasting impacts on net income and ending inventory balances, which is relevant to
understanding the implications of different inventory valuation methods

 Application of FIFO: The article illustrates the practical application of FIFO in

inventory valuation and management, highlighting its significance in financial reporting
and decision-making processes within organizations, which aligns with the learning
objectives of the week

Conclusion:

The article effectively elucidates the FIFO method, its functioning, and implications, providing
valuable insights into inventory management practices. Its clear explanations and practical
examples enhance understanding of inventory valuation concepts and their real-world
applications.

Overall, the article serves as a useful resource for gaining a deeper understanding of FIFO and its
role in effective inventory management.
https://www.investopedia.com/terms/f/fifo.asp